Pew/IDL/midsem/133-2021 8. Which two of the following are fundamental principles as stated in the Code of Ethics for Professional Accountants? 1. Objectivity — I. Independence IL. Confidentiality IV. _ Professional skepticism a) Tand I b) Land 1 ©) Mand IV 4) Mand IV (7 Which of the following are examples of the expectations gap? I. The audit report confirms the financial statements are accurate - II An unmodified opinion means the company is a going concern TIL. The auditor tests all transactions IV. The auditor can be sued for negligence if they issue an inappropriate opinion a) 1,11, 1 b) LILIV— c) 1& only d) 1&Monly 10. The objective of an audit of financial statement isto enable an auditor to on financial statements. a) Completion of Audit Express on opinion ©) Check the transactions d) Check fraud 11. Which of the following is an example of integrity? 8) Charging the client a lower audit fee than quoted because the work performed took half as long as anticipated. b) Upon becoming aware of fraudulent activity at the client, not taking steps to prevent further losses as intimidation threats are being made, ©) Taking advantage of a client’s poor controls over inventory by helping yourself to a few small immaterial items. d) Accepting the use of the client’s holiday resort for one month because it was graciously offered. 12. Adhering to the Institute of Chartered Accountants (CAG) Code of Ethics and Conduct is an essential part of membership of ICAG. a) True b) False Page 3 of 12Pew/IDL/midsen/133-2021 13. The concept of stewardship means that a company’s directors a) Are responsible for ensuring that the company complies with the law b) Are responsible for ensuring that the company pays it tax by the due date 9 Safeguard the company’s assets and manage them on behalf of the shareholders d) Reports suspected fraud and money laundering to the authorities 14, Engagement letters are important because they form a contract between the audit firm and the client. a) True b) False 15. Which of the following is not a right of a statutory auditor? a) To attend board meetings by To receive information and explanations from officers of the company ©) To receive notice of and general meetings 4) To have access to all company accounting books and records 16, Which of the following is the correct definition of an audit? a) The process by which the auditor can state that the financial statement shows a true and fair view i by The examination and certification of the opinion on the financial statements of an entity by a duly appointed auditor in pursuit of that appointment ©) The independent examination of and expression of opinion on the financial statements of an entity by a duly appointed auditor in pursuit of that appointment 4) A process that produces a report stating that nothing has been found wrong in the financial statements 17, Who should make up a typical audit committee of an entity? a) The audit committee should be made up of any members of the entity _b) The audit committee should be made up of non-executive directors and include someone with relevant financial experience, ©) The audit committee should be made up of executive directors and include someone with relevant financial experience d) Shareholders only Page 4 of 11PewDUmidsem/133-2021 (18 Professional independence is a subset of which two ofthe following paits of fundamental principles? a) Integrity and due care ) Integrity and objectivity 9 Integrity and professional competence 4) Objectivity and professional behavior 19. The following inherent limitations in an audit affect the auditor's ability to detect material misstatements except: a) Audit process permeated by judgement. b) Poor corporate governance. ©) Test and sampling. d) Audit evidence. (20, Which of the following is least likely to be included in an engagement letter? ~~ a) The names of the staff involved in the assignment. b) An outline of management’s responsibility with regard to the financial statements. ©) The basis for setting the audit fee. 4) Anoutline of the scope of the audit. 21. Which of the following is true with respect to the appointment of auditors? a) Auditors are appointed by the board of directors every three years b) Auditors are appointed by the members automatically stay in office until resignation or removal e - ©) Auditors must be appointed by the board of directors every year 9 Auditors are appointed by the members every year 22. The agreed terms of the audit engagement shall be recorded in an audit engagement letter or other suitable form of written agreement and shall include reference to the expected form and content of any suspected fraud risk a) True b) False — 23, Which body sets Code of Ethics for Professional Accountants? a) IFAC b) IASB ©) ACCA 4) IAASB— Page 5 of 12PewIDLimidsem/133-2021 24, Which of the following statements regarding the appropriateness of audit evidence is/are true? 1 It concems the quantity of audit evidence needed u. It concerns the relevance and reliability of audit evidence a) Neither Inor I b) Both I and IT ©) Tonly @) Monly (25)Which international standard on auditing (ISA) deals with the auditor’s responsibility towards fraud? a) ISA200 b) ISA 220 ©) ISA 230 d) ISA240 26. Which of the following will not form part of an engagement letter? a) A statement that management is responsible for providing all information that the auditor request b) The fee arrangements ©) The proposed auditor’s report 4) A statement about risk of misstatement because of inherent limitationsin audit _ 27. Terms used in an opinion (‘give a true and fair view’ or ‘present fairly, in all material respects’) are equivalent terms a) True b) False — 28, Misstatements, including omissions, are considered to be material if, individually or in the aggregate -a) They could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements b) They resulted from mismanagement of those in charge of governance c) They result in a significant change in the financial statements d) They are not a result of procedures to uncover fraud Page 6 of 11Peu/tDLdsenv/133-2021 29. Which of the following standards are not issued by the International Auditing and Assurance Standards Board? a) International standards on assurance engagements b) International financial reporting standards ©) International standards on quality control 4) International standards on related services 30. Judgements about materiality are made in the light of surrounding circumstances, and are affected by: a) The auditor’s perception of the financial information needs of users of the financial statements. 'b) Both the auditor’s perception of the financial information needs of users of the financial statements, the size or nature of a misstatement. ©) The company’s control environment. d) The size or nature of a misstatement 31. Which of the following is a characteristic of any fraud? a) Itis concealed b) Itresults in the misappropriation of assets ©) Itis intentional 4d) Itresults in misstatement of the financial statements 32. An auditor has been asked to replace an existing auditor. Which of the following, statements regarding a new auditor's communication with the existing auditor is/are true? 1) The new auditor can decide whether it is necessary to communicate with the existing auditor 1) _ Both the new and old auditor must have the client’s permission to communicate a) Neither Inor II b) Both Tand IT ©) only 4) Monly 33. International Standards on Auditing are the standards that are applied to financial accounting a) True b) False Page 7 of 11Peu/TDLmidsemd/133-2021 34. Which of the following would be considered before accepting a new appointment as. auditor? I. The potential fee TI. The reputation of the audit firm III. Ethical threats and safeguards IV. The available resources a) Mand IV only b) I, Hand IV only ©) HI, IM and IV only 4) 1,11, Mand IV 35. Which of the following is not an ISA 200 requirement relating to an audit of financial statements? a). The auditor shall exercise common sense in planning and performing an audit of financial statements b) Compliance with relevant ethical requirements, including those pertaining to independence ©)” The auditor shall plan and perform an audit with professional skepticism, recognizing that circumstances may exist that cause the financial statements to be materially misstated. 4) To obtain reasonable assurance, the auditor must obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level 36. International Auditing and Assurance Standards Board issues all the following standards except: a) _ Intemational Standards on Assurance Engagements (ISAE). by _ International Standards on Related Services (ISRS). c) International Standards on Special Purpose Audits (ISPA). ) International Standards on Quality Control (ISQC). 37. To safeguard against a self-interest threat to objectivity, a professional accountant in public practice entrusted with money (or other assets) belonging to others should do all the following except a) Report all transactions to the person whose money is being held on a periodic basis b) Atall times be ready to aecount for those assets and any income, dividends or gains generated ©) Use such assets only for the purpose for which they are intended 4) keep such assets separately from personal or firm assets Page 8 of 12Peu/tDLmidser/133-2021 38. Which of the following statements regarding responsibility of fraud are true? L Only those charged with governance are responsible for the prevention and detection of fraud ita Both those charged with governance and management are responsible for the prevention and detection of fraud mm. The auditor is responsible for detecting any material fraud a) Tonly b) Ionly ©) Land It 4) Wand I~ 39, In which of the following situations is the duty of confidentiality most likely to be breached? ay When information is disclosed in a court of law b). When information is disclosed in response to a formal investigation by ICA-G. c) Ifthe accountant obtains authorization from the client before disclosing the information d) If information is disclosed after the accountant has resigned from their position with the employer 40. Which of the following statements explains one of the reasons why external audits provide only reasonable, but not absolute, assurance? a)__Some reliance is placed on.the work of intemal audit b} Not all transactions and balances are examined ©) The audit has to be completed within a specific timeframe 4d) Notall members of the audit team are fully qualified accountants 41. When may gifts made to an accountant within a workplace setting be accepted? a) When they are significant in value b) If they are intended to encourage unethical behavior ©) When they are made in normal course of public relations — 4) When you are authorized by your senior management to give an expensive gift to the external accountant (42; What type of threat is most likely to arise when a client with a dominant and persistent ~~ personality attempts to influence an accountant’s professional judgement? a) Advocacy b) Familiarity c) Self-interest Page 9 of 11Peu/1DL/midsen’133-2021 43. The engagement letter should include a statement giving unrestricted access to persons within the entity from whom the auditor determines it necessary to obtain audit evidence a) b) True False 44, Which of the following is the most appropriate definition of negligence when considering auditor's liabi a), Negligence is the deliberate act to cover up deficiencies identified throughout the b) } d) course of the audit. Negligence is some act or omission which occurs because the person concerned has failed to exercise the degree of care and skill appropriate to the circumstances. Negligence is some act or omission which occurs because the person concerned miscalculated the time necessary to undertake the audit. Negligence is some act or omission which occurs because the person concerned is not yet a qualified accountant. 45. What is the appropriate response if a prospective client does not give permission toa proposed new auditor to communicate with the existing or predecessor auditor? a) b) °) d) contact the existing auditor anyway decline the appointment attempt to find out the information by other means and then decide on whether to accept or decline the appointment accept the appointment anyway as communication is only a matter of professional courtesy i —~— 46. An audit in accordance with ISAs is conducted on the premise auditors share with management and those charged with governance responsibilities for financial statements, accounting methods and internal control. a) b) True False 47. What are an interim audit and final audit? review process that is less than a full audit; Final audit: a full audit erformed during the year; Final: performed after the year end performed by the internal auditor; Final: performed by external auditor formed by the auditor appointed until next AGM; Interim: performed by the auditor appointed at the AGM Page 10 of 12